Resumé Debate: On a level playing field, Google and Facebook would have to pay at least SEK 1 billion in taxes in Sweden. It's time for Swedish politicians to act, writes Magnus Heljeberg, CEO of JCDecaux.

The Swedish media market has undergone enormous changes over the past ten years. New digital players have taken market share and formerly dominant media companies have seen their business shrink brutally in an increasingly fierce competition for advertisers' investment in advertising. The pace of change and the increase in competitive pressure is, in many ways, unprecedented. It is fair to say that it is everyone's battle against everyone else in the Swedish media market, day by day, week by week, year by year.

Increased competition, shorter lead times from creative idea to actual delivery in different marketing platforms and digitalisation of production and processes are all to be welcomed. Sweden is a relatively small country in media terms and benefits from a dynamic and highly competitive media market.

But every market needs legislation and regulation that allows all players to compete on a level playing field. Without a level playing field, some market participants, who benefit from a lack of legislation and/or regulation, will have a major competitive advantage over those companies that are regulated. The end result may be that the heavily regulated firms are out-competed by their - by the regulator - favoured competitors.

The Swedish media market does not have a level playing field today. The distortion of competition consists mainly of three elements:

• Media companies that do not pay corporate tax in relation to their actual turnover in the Swedish media market (Google and Facebook).
• Media companies that in reality do not have to take responsibility for advertising on their platforms (Google and Facebook again).
• Media companies forced to pay a turnover tax on analogue advertising (Outdoor and Direct Advertising) in the form of a pure penalty tax of 7.65%.

In the case of corporate tax, the following concrete examples can be given. Market statistics from IRM show that the total media investment in Sweden for the full year 2017 was SEK 37,725 million. Of this, 26% (SEK 9,800 million) went to keyword marketing and 5.2% (SEK 1,960 million) to social networks.

The keyword marketing market is completely dominated by Google and the social networking market is completely dominated by Facebook. None of these advertising investments, totalling SEK 11.7 billion, are reported as taxable income in Sweden. The two corporate giants therefore pay zero (0) SEK in corporate tax in Sweden.

By comparison, JCDecaux paid SEK 25 million in corporate and advertising tax in 2017 on a turnover of approximately SEK 300 million. If we make the assumption that Google and Facebook on a level playing field would have to pay similar levels of tax - well, that would mean just over SEK 1 billion extra for Swedish taxpayers in 2017 alone. In reality, this is a low estimate, as the real profit margins in Sweden for these players far exceed an outdoor company like JCDecaux - with just over 0.8% of the Swedish media market share, compared to Google and Facebook's 32%.

In terms of responsibility for advertising, it is usually argued that it is practically impossible for Facebook/Google to take responsibility for all content on their platforms. The strict regulation that applies to other media based in Sweden, regarding the prohibition of sexist advertising, alcohol advertising, advertising directed at children, incitement to hatred and general good advertising practice, should therefore not apply to these particular American players. This is, of course, pure sneezing. The same rules should apply to all players in the media market and the cost of regulation is a normal cost of doing business. All private companies must show responsibility and be part of the societies in which we operate. Avoiding responsibility and reasonable regulation will ultimately only lead to a public opinion backlash - which could damage the conditions for the whole media market.

Finally, the 7.65% advertising tax on analogue outdoor and direct advertising is a purely punitive tax. No other country has this type of distorted turnover tax, targeting two minor categories of advertising in a brutally competitive media market. It may be added that the ongoing discussion within the EU to impose a European form of turnover tax on Google and Facebook is just as fundamentally flawed as the Swedish advertising tax. States should not tax turnover but corporate profits. Anything else stifles competition, innovation and growth in private enterprise

The Swedish media market needs a level playing field. The same conditions must apply to all players. It is time for Swedish policy to act on three points:

1. Let turnover, costs and corporate profit be reported in the market where a media company actually generates its revenues.
2. The same responsibilities and rules for advertising should apply to all companies that charge for advertising space in a market - regardless of the media platform.
3. Abolish the Swedish advertising tax and prevent the introduction of a similar dysfunctional punitive tax at EU level.

Magnus Heljeberg
CEO JCDecaux Sweden

The article was published on resume.se 2018-06-07